![]() ![]() The main concerns include operating costs being higher than what is shown in CLSK financials and the contract with the Atlanta power department ending prematurely in three years rather than fives year (management guidance).īased on the following assumption, we arrive at a fair value of just the bitcoin mining segment at $18 with a 15% upside from the current market price. Cash flow is discounted at 15% to consider the risks associated with the company, as highlighted by the short report.Operating profit from mining operating to cash conversion ratio is 50% in 2021 and will normalize to 75% by 2025.We also assume the BTC mining operation will liquidate by 2025 as their contract with the Atlanta city power department ends.20 BTC daily mining rate from 2022 to 2025 at Bitcoin price on average being $35,000.an investor gets their microgrid and mining equipment free of charge while also having a 15% margin of safety in their bitcoin mining rig segment. With our valuation methodology, we argue at the current market prices of CLSK and assuming bitcoin stays at $35000. Here we have ignored the revenue of their microgrid business which is expected to make 17 to 21 million dollars in 2021 with a contracted backlog of over $24.5 million. With a fully diluted market cap of 510 million dollars, CLSK, based on just their bitcoin mining operation, would be trading at 2020 Price/Sales of 2X. Assuming a bitcoin at $35000 and assuming a decrease in hash rate allowing the company to mine 20 bitcoin (upper range of the guidance), CLSK expects to make more than $255 million in revenue by mining bitcoin in 2022. This would roughly equate to the mining of 18-20 bitcoins per day. The company has ordered more mining rigs and will have a 3.2 EH/s mining rate by 2022 from the current 1.1EH/S. Management guided for $30 to $40 million revenue coming from Bitcoin mining this year, while last five years accumulative revenue from their energy business was less than $15 million.Īdditionally, more growth is expected ahead. We feel the acquisition of ATL was a capital well allocated by the management. The bears' concerns were that ATL acquisition was a distraction from their microgrid business, which failed to scale in line with management's expectations.Īnother concern was that this acquisition was made to get a valuation expansion from the market as mining companies like RIOT Blockchain ( RIOT) and Marathon Digital Holdings ( MARA) saw a meteoric rise in their prices (see below). With over 95% of their energy is sourced from renewables (majority from nuclear energy), we feel this also protects them from any regulation risk due to environmental costs of mining which other miners might suffer from.Īnother interesting aspect of their revenue breakdown shows that Bitcoin mining consists 83% of their revenue, ostensibly making it a digital currency mining company. Assuming Bitcoin on average stays around $35000 (current price) and their operating cost is $6000, that still garners more than 80% operating profit margin. Since March, Bitcoin has corrected more than 45%. Source: Company's Latest Quarter Financialsīecause of this cost advantage, it reported a 90% operating margin for its Bitcoin mining segment as energy cost is the main component of the cost structure. Management in Q2 earnings call claimed that their energy cost is below $4500 (per bitcoin) and total cost below $6,000. In late 2020, CLSK acquired an Atlanta-based data center and bitcoin mining operation called ATL.CLSK claims ATL has a five-year strategic contract with the city power department that allows subsidized energy. CleanSpark expects to mine 18-20 Bitcoin per day by 2022 this guidance is likely revised upwards. This, in turn, should bode well for Bitcoin value proposition over time and consequently Bitcoin mining companies like CleanSpark ( NASDAQ: CLSK).Īdditionally, this setup could act as a tailwind for mining companies outside of China, as network difficulty will reduce, allowing them to extract a higher share of the network reward and, as a result, improve their revenues. In the long run, we believe this will make the bitcoin network more decentralized as Bitcoin mining companies outside of China add capacity, increasing the network's resiliency. This Forced crypto miners to either go offline or close their mining production. dia/iStock via Getty Images Outlook on Bitcoin Networkīitcoin network hash rate has dropped significantly after the China crackdown. ![]()
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